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OTPP cuts stake in Maple Leaf Foods

Ontario Teachers' Pension Plan will sell 21 million shares in Maple Leaf Foods (MFI-T) at a sharp discount, as it continues to whittle down its stake in the Canadian food processor.

Teachers' said on Tuesday it will sell the stake at $10.50 a share to underwriters BMO Capital Markets and TD Securities to complete a secondary offering. The price is a 17 percent, or $2.19, discount to Maple Leaf's finish at $12.69 on the Toronto Stock Exchange on Tuesday.

The pension fund has moved to whittle down its stake in Maple Leaf -- once its largest single holding of a listed company in Canada -- since this summer, as it looks to divest some Canadian holdings. Within the last four months, Teachers' has cut its stake in Maple Leaf twice, from more than one-third to less than 10 percent, following a sale in August to hedge fund West Face Capital and then Tuesday's secondary offering.

The latest selloff should be bearish for the stock when trading resumes on Wednesday, said analyst Robert Gibson of Octagon Capital in Toronto, who expects Teachers' to eventually sell all its shares.

"This isn't all of (Teachers' shares) for one thing, and they're selling at a pretty big discount for another," Gibson said. "Anybody who likes the stock will buy it because it's so cheap."

Teachers' will still hold about 13.5 million shares in the company after the sale. The discount is "just a function of the size of the deal," said Teachers' spokeswoman Deborah Allan. "As for our remaining shares, we're still a major shareholder, so our priority is to maximize our investment's value."

A Maple Leaf spokesman could not be immediately reached for comment.

The low selling price indicates a lack of demand for Maple Leaf shares, Gibson said. The company, one of Canada's biggest pork processors and bakers, unveiled a $1.29 billion capital plan last month to upgrade some plants and close others as it tries to narrow the gap with lower-cost U.S. rivals.

Maple Leaf shares have not recovered since a deadly tainted meat scandal in 2008, however they have appreciated about 40 percent since early August on expectations that activist investor West Face would effect positive change.

The latest transaction is expected to close on or about December 16, subject to customary conditions.